Page 38 - DECO201_MACRO_ECONOMICS_ENGLISH

Unit 2: National Income

Profits 2500 Notes
Wages 7000
Net exports 2750
Rents 250
Depreciation 250
Indirect business taxes 1000
Undistributed corporate profits 600
Net foreign factor income 30
Interest 1500
Social security contribution 0
Transfer payments 0
Personal taxes 1650
(a) Calculate GDP and GNP with both the expenditure and income approach.
(b) Calculate NDP, NNP, NI and domestic income.

(c) Calculate PI.
(d) Calculate disposable personal income.
2. In an economy the following transactions have taken place:
A sells to B for 50 and to C for 30; B sells to private consumption for 40 and to export
for 80; C sells to capital formation for 50. Calculate GNP (a) by category of final
demand at market prices and (b) industry of origin at factor cost. (Since no mention of
taxes is there, market price and factor cost valuations are identical).
3. Suppose capital stock of an economy is worth 200 million and it depreciates at the rate of
10 per cent per annum. Indirect taxes amount to 30 million, subsidies amount to 15
million. Its GNP at market prices is 1200 million. Calculate the national income. (NNP at
factor cost is termed national income).
4. What is the impact (if any) on the national income of India in each of the following cases?
(a) Shyam receives 5000 as a gift from his father who is also a resident of India.
(b) Aggregate inventories in Indian companies go down by 20,000.
(c) A receives 100 dollars as dividend from a company based in the USA.

(d) A sells shares and reaps capital gains worth 1,000. Give reasons for your answers.
5. Suppose that furniture production encompasses the following stages:
Stage 1: Trees sold to timber
companies 1,000
Stage 2: Timber sold to furniture
company 1,700

Stage 3: Furniture company sells
furniture to retail store 3,200
Stage 4: Furniture store sells
furniture to consumers 5,995

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